SEC Chair Gensler’s Tough Views on Crypto Remain Unchanged
As Securities and Exchange Commission (SEC) Chair Gary Gensler gets ready to testify on Capitol Hill, his written remarks submitted ahead of the hearing indicate that his tough stance on crypto hasn’t softened. Gensler acknowledges the industry’s non-compliance with securities laws and compares it to the situation in the 1920s before the establishment of federal securities laws. Although Gensler will discuss various topics during the hearing, his comments on crypto will be closely watched by an industry that is hindered by regulatory uncertainty in the US.
Gensler’s Consistent Position on Crypto and Investment Contract Test
Gensler’s position on crypto has been consistent and clear. He believes that the existing securities laws in the US are sufficient for crypto regulation because most crypto tokens are likely to meet the investment contract test. This test refers to the Howey Test, which determines whether an offering is a security based on a Supreme Court ruling from 1934. While Gensler hasn’t explicitly stated whether Ethereum should be considered a security or commodity, he has referred to “everything but Bitcoin” as securities in an interview.
The SEC vs. CFTC and the Impact on Tokens and Firms
The distinction between securities and commodities is crucial in determining whether certain tokens and firms should be regulated by the SEC or the Commodity Futures Trading Commission (CFTC). This debate has sparked disagreements and industry-fueled narratives about a turf war between the two agencies. Crypto advocates argue that an enforcement-based regulatory regime does not provide clarity or support for investors and issuers in the crypto space. Both Republican and Democratic lawmakers have criticized the SEC’s approach and called for clearer rules and registration pathways for crypto trading firms.
Gensler’s Regulatory Gambit and Resistance from Ripple Labs and Grayscale
Despite pushback, Gensler remains committed to his regulatory approach. He believes that investors and issuers in the crypto asset securities markets deserve the same protections as those in traditional securities markets. However, his stance has faced challenges. Ripple Labs secured a victory in court when it was determined that certain sales of XRP did not constitute the sale of unregistered securities. Additionally, the SEC’s denial to convert Grayscale’s Bitcoin trust into a spot Bitcoin ETF was deemed “capricious” by a court. Nevertheless, Gensler remains steadfast in his commitment to regulating the crypto industry.
Hot Take: Gensler’s Unwavering Stance on Crypto Regulation
SEC Chair Gary Gensler’s written remarks ahead of his testimony demonstrate his unwavering stance on regulating the crypto industry. Despite criticism and legal setbacks, Gensler maintains that the industry’s non-compliance with securities laws necessitates stricter regulation. His reference to the Howey Test and the distinction between securities and commodities underscores the complexity and ongoing debate surrounding crypto regulation. However, crypto advocates argue that an enforcement-focused approach does not provide the clarity and support needed for the industry to thrive. As Gensler prepares to testify, his comments on crypto will be closely watched by industry participants hoping for greater regulatory certainty in the US.
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